MBK can drive your car – maybe

Kumho, Korea’s seventh largest chaebol, with automotive, manufacturing, leisure, logistics, chemical and airline subsidiaries, has been forced to shed assets to reduce the KRW600 billion ($519 million) of debt stemming from its KRW6.4 trillion ($5.5 billion) acquisition of Daewoo Engineering & Construction Co. in 2006. Kumho Rent A Car Co., Ltd., wholly owned by Kumho division Korea Express, the country’s largest logistics company, is the group’s latest attempted disposal. Established in 1990, Kumho Rent A Car Co. operates 160 branches nationwide and owns 50,000 vehicles. The company is the largest Korean car rental player, with about 23.7% market share, and one of the core businesses of the group.

Although the deal size has not been confirmed, some analysts put the company’s market value at about KW300 billion ($260 million, but other sources cite a figure closer to KRW100 billion ($86.5 million). Three other firms, including highly successful Korea investor Affinity Equity Partners and SK Group, Korea’s fourth largest chaebol, as well as two unidentified financial sponsors, also reportedly bid for the asset.

Kumho Asiana and Korea Development Bank, the group’s main creditor, said that the MBK-led team was the preferred bidder. The sellers said publicly that KT has been operating automotive rental business under KT Rental, and therefore Kumho Rent A Car and KT Rental could expect mutual synergies, adding that KT should have no problem raising capital.

The deal is expected to complete by January 2010. However, delays are possible, because the transaction would have to be approved by Korean Express and the parent group’s shareholders, who might question why Kumho Asiana assumed the car rental subsidiary’s debts.

MBK, meanwhile, may have difficulties raising the requisite leverage. A local private equity player said to AVCJ, “In Korea, there are numerous large buyout opportunities set up by local conglomerates, but the problem is that those deals would be too expensive for private equity firms.”

MBK was said to be negotiations with Hana Bank for leverage finance. Shinhan Bank and Standard Chartered Bank are reportedly also looking at financing one of the bidders.

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• Topics
• North Asia
• Buyouts
• Industrials
• Affinity Equity Partners
• MBK Partners